The Donation-Based Crowdfunding Explosion

| November 20, 2012

Crowdfunding raised $1.5 billion in 2011, funding over one million projects. That number is set to double this year, according to The Crowdfunding Industry Report. By year’s end, there are expected to be more than 530 crowdfunding platforms (CFPs), up 60% since 2011.

One of the most interesting facts about crowdfunding is how successful the philanthropic, of all models, is at raising money. Donation-based campaigns raise a staggering 49 percent of all crowdfunding monies. It is not inconceivable that the rough economic times have led to the explosion in donation-based crowdfunded campaigns.

Crowdfunding is roughly broken down into four distinct categories: equity (the funders earn back profit-share or revenue), lending (the funders earn back from the original principal investment), reward (the funders earn back a non-financial return) and donation (the funders are philanthropically motivated). Nowadays it seems like everyone—even Laina Morris of the “Overly Attached Girlfriend” meme—is in on the donation model. Suw Charman-Anderson of Forbes, commenting on the Crowdfunding Industry Report, gets why the donation model is so effective:

“Looking at campaign sizes reveals just how different equity-based crowdfunding really is from other types. The average equity-based campaign is aiming to raise $84,597, compared to $5,587 for lending, $4,076 for rewards and $664 for donations. This may go some way to explaining why donation-based campaigns do so well, raising 49 percent of all funds: Because the campaigns are smaller, they stand a greater chance of reaching their goals. Equity-based projects raise 18 percent of the total, lending raises 22 percent, and rewards just 11 percent.”

The influence of the donation model is growing. Matthew Inman, founder of popular humor site The Oatmeal, which draws 7 million monthly visitors, is turning to philanthropic crowdfunding. Inman, who is spearheading the Indiegogo Tesla Museum campaign, took a circuitous route to get to the donation model.

“I knew that I had a good following for a while, but I didn’t think it was people who would actually act on things financially. My site is the kind of website where you go to giggle. You don’t have your credit card in your hand; you’re not looking to fill out a form; you’re not looking to do anything that requires a time commitment or a financial commitment. That’s fine. I’m not Amazon. But when I got threatened with a lawsuit earlier this summer and I saw my readers donate — I wanted to raise $20,000 [for the National Wildlife Federation and the American Cancer Society] and they ended up donating $211,000 — I realized that my following wasn’t just strong, but these people were actually willing to help me in a cause, which was really cool to see.”

Everyone, of course, has heard of Kickstarter and Indiegogo, but in the donation space, Razoo, a crowdfunding platform for non-profits, is making big waves. Razoo has raised over $104 million and is one of the best crowdfunding sites you’ve probably never heard of.

“Razoo has raised more money as a non-profit platform than the other two combined, and it isn’t restricted to project-based funding,” writes Non-profit Quarterly’s Steve Boland. “But it can certainly be used that way, as Razoo lets any non-profit create project-specific fundraising widgets.”

Razoo also has a robust social media tie-in on their site, making the experience more like participating in a philanthropic community rather than a solitary act of donating.

Read More from Magnet Media

Tags: , , , , , ,

Category: leading women

Comments (1)

Trackback URL | Comments RSS Feed

  1. The Donation-Based Crowdfunding Explosion http://t.co/h62lIgA0 #crowdfunding #philanthropy #nonprofit #socialmedia #betterworld #socialgoood